As the Government has been too slow to regulate the pensions market, savers need to be vigilant over that the next 18 months and not fall victim to unscrupulous pension salesmen.
Aril 2006 will see the start savers being allowed to invest in residential property, wine and classic cars as part of their self invested personal pensions (Sipps).
Standard personal pensions are regulated but Sipps are not. This was not a problem before as money was invested in unit trusts and shares and such investments are regulated by the Financial Services Authority (FSA).
However April will see Sipps including buy to let properties, which will be unregulated for the first year at least. This raises fears of exploitation by unscrupulous salesman of the gap in regulation to tempt people to make investments that are not in their best interests.
Tom McPhail of Hargreaves Lansdown, an independent financial adviser said, "Along with the investor interest, we are also seeing interest from less welcome quarters, such as unregulated property developers. Some are reputable, but it is already evident that this is not universally the case."
The Government has decided to bring the Sipps schemes under the regulation of the FSA because of the previous pension mis-selling scandal. Although this is a welcome move, the regulation will not come into effect until April 2007 which will leave investors without protection for a year.
Approaching a regulated financial adviser is fine but you still need to take care as standards vary. Investors are routinely sold policies that they do not require because they are either inappropriate or they do not understand them.
Mick McAteer at Which? said, "Our view is that there is a chronic problem with the quality of advice."
You cannot guarantee you are going to get good financial advice but you can take measures to protect yourself. Importantly seek advice from and independent adviser of which there are three types. Tied agents sell savings, pensions and investments for either a bank or building society. Multi tied agents sell products from a limited number of firms so their recommendations are limited. Independent financial advisers can recommend schemes that are best for you as they can choose from the entire market without restrictions.
IFA Promotion (www.unbiased.co.uk or 0800 085 3250) can help with finding and independent adviser.
Ensure the individual or company is registered by the FSA as you will be protected if you receive bad advice or need to make a complaint. Also look at the FSA’s website to see who is authorised at www.fsa.gov.uk.
Look at the adviser’s qualifications as advisers must have the certificate in financial planning. Check for extra qualifications such as the advanced financial planning certificate (AFPC).
Most advisers are paid by commission when they sell that company’s products or through fees from clients. This applies to tied and multi tied advisers as they are paid by commission only. This can lead advisers recommending products that pay the highest commission rather than what is best for the investor.
Advisers who are ‘independent’ must offer customers the option of paying by fee. Some only offer this option but others give customers a choice of paying by fee or commission.
Watch out for the pension push
Pensions Quote Line
0845 108 0505
Watch out for the pension push
Tue, 11 Oct 2005
Pensions.co.uk is part of a large network of financial sites created to help advise you on life events, such as buying a house, Mortgages.co.uk; insuring your car - CarInsurances.co.uk; your life - LifeInsurance.co.uk; and your home - HomeInsurance.co.uk.
1998 - 2008 UK Pensions - Planning before, at the onset and during retirement.
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